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CIRCULAR No

CIRCULAR No. 27/1999/TT-BTC OF MARCH 11, 1999 GUIDING THE REGIME OF FINANCIAL MANAGEMENT AT THE GROUPS OF AIRPORTS (STATE ENTERPRISES ENGAGED IN PUBLIC UTILITY ACTIVITIES)

Pursuant to Decree No. 56/CP of October 2, 1996 of the Government on State enterprises engaged in public utility activities;

Pursuant to Decision No. 113/1998/QD-TTg of July 6, 1998 of the Prime Minister on the conversion of the groups of airports in the North, the Center and the South from non business units having revenues into State enterprises engaged in public utility activities and Decision No. 258/1998/QD-TTg of December 31, 1998 of the Prime Minister amending and supplementing Decision No. 113/1998/QD-TTg of July 6, 1998 of the Prime Minister;

Pursuant to Circular No. 06/TC/TCDN of February 24, 1997 of the Ministry of Finance guiding the implementation of the regime of financial management at the State enterprises engaged in public utility activities;

In order to conform with the characteristics of the activities in the field of management and exploitation of the infrastructures at the airports, the Ministry of Finance provides the following guidance on the regime of financial management at the groups of airports:

I. GENERAL PROVISIONS

- Groups of airports are State enterprises engaged in public utility activities with the task of managing and exploiting airports aimed at supplying air services and public utility services according to the State policies and the plans assigned by the State and the prices set by the State. They carry out the financial regime stipulated in Circular No. 06/TC/TCDN of February 24, 1997 of the Ministry of Finance "Guiding the regime of financial management at State enterprises engaged in public utility activities" and specific stipulations in this Circular.

- Apart from the task of operating in public utility, the groups of airports are authorized to organize additional business activities as prescribed in the Status of Operation and in conformity with their capabilities and the needs of the market under the following conditions:

+ Having got the written agreement of the Vietnam Civil Aviation Administration.

+ Not affecting the realization of the public utility tasks that the State has assigned to them.

+ To register the additional businesses as currently prescribed.

+ To account the additional business separately.

+ To discharge the obligation of paying tax on the additional businesses as prescribed by law.

II. CONCRETE STIPULATIONS

A. FINANCIAL RESULTS AND HOW TO HANDLE THEM

1. Turnover: The turnover of the groups of airports includes the turnover from public utility activities, turnover from production and business activities (if any) and other activities.

1.1. Turnover from public utility activities:

Turnover from public utility activities of the groups of airports includes:

a/ Turnover from the supply of services at the airports:

- Income from ground technical and commercial services,

- Income from operating landings and take-off of aircraft,

- Income from the use of air parking grounds,

- Income from passenger service,

- Income from rent of desks to fill passengers� procedures,

- Income from concession of exploitation right,

- Income from the renting of specialized equipment,

- Income from security scanning,

- Income from providing supplementary services in transit flight operations,

- Income from the renting of ground space at the air terminal,

- Income from car parks,

- Income from renting space outside the terminal,

- Income from renting advertisement space,

- Other incomes.

b/ Collection of charges and fees (if any)

c/ Income from allowances and price subsidies of the State (if any) and other incomes

The contents and level of collection of incomes from public utility activities of the groups of airports shall follow Inter-Ministerial Circular No. 171/1998/TTLT/BVG-CAAV of February 7, 1998 of the Government Pricing Commission and the Vietnam Civil Aviation Administration and the concrete stipulations of the Vietnam Civil Aviation Administration.

1.2. Turnover from business activities and other activities: to conform with the stipulations for State enterprises engaged in business activities.

2. Expenditures: The expenditures of the groups of airports include the expenditures on public utility activities, business activities and other activities.

2.1. Expenditures on public utility activities: The expenditures on public utility activities of the groups of airports include:

- Expenditures on wages and allowances,

- Expenditures on social insurance, medical insurance and trade union activities,

- Expenditures on raw materials and materials, fuel and motor power,

- Purchases of labor tools,

- Expenditures on depreciation of fixed assets,

- Major repair of fixed assets,

- Expenditures on regular maintenance and repairs of fixed assets,

- Expenditures on training and application of specialized science and techniques,

- Expenditures on management of operational assurance,

- Expenditures on flights for equipment run-in,

- Expenditures on land rent,

- Other related expenditures.

2.2. The expenditures on business operations and other activities shall comply with the stipulations for State enterprises on business operation.

3. Management of financial collection and expenditure of groups of airports

- The groups of airports are allowed to use incomes to make up for expenditures, including: income from public utility activities used to offset expenditures on public utility activities, the taxes to be paid as prescribed by law (excluding enterprise income tax). Particularly for the collection of charges and fees, they are allowed to follow State prescriptions for the management of charges and fees. The income from business activities and other activities shall be used to offset the total cost of the products, the services already consumed and other expenditures, taxes and other levies to be paid to the State as prescribed by law (excluding enterprise income tax). The production and business activities must be recorded in the books of accounts, where the incomes, expenditures and the financial result of these activities must be recorded separately, and it is not allowed to use the financial result of public utility activities to offset the losses (if any) of the production and business activities.

- The vouchers shall be issued solely by the Ministry of Finance (the General Tax Department). If specific vouchers are used, the groups of airports must register with the tax management agency before using them

4. Handling financial results:

4.1. For the groups of airports which are State enterprise engaged in public utility activities, the difference between incomes and expenditures shall be handled as follows:

a/ To pay the enterprise income tax as prescribed by law.

b/ To make up for the fines for violations of the discipline on budgetary remittances, administrative violations, violations of contracts, fines over overdue debts and not yet subtracted valid expenditures when determining the taxable profits.

c/ To offset losses that are not yet subtracted from the pre-tax profits.

d/ For the remaining profits, after subtracting the amounts prescribed in Clauses a, b and c, the groups of airports must not use them to set up funds on a proportional basis. The following restrictions must be observed:

+ Investment and development fund: minimum deduction is 50%.

+ Financial reserve fund: deduction of 10%. The balance of this fund must not exceed 25% of the prescribed capital.

+ Deduction for the two funds, reward and welfare, shall not exceed three months of real wages if the remittance to the Budget in the reporting year is higher than that in the previous year, and two months of real wages if the Budget remittance of the reporting year is equal to or lower than that of the previous year.

After deduction of the amounts prescribed in Clauses a, b, c and d in the investment and development fund and the financial reserve fund, if the profit contributed to the reward and welfare funds is not used up, the remainder shall be wholly carried over into the investment and development fund. If this is not enough to set up the reward and welfare funds equal to two months of real wages the groups of airports shall be subsidized by the State for the deficient amount.

4.2. For the groups of airports whose income is not enough to offset the expenditures or whose profits are not enough to set up the reward and welfare funds equal to two months of real wages, the following solution shall be adopted:

4.2.1. After using 50% of the profit from business operations and other activities to make up for the shortage, if the enterprise is still making losses, the State shall provide support by:

- Providing enough allowance to make up for the remaining losses

- Providing two months of real wages for the reward and welfare funds.

4.2.2. 80% of the remaining profit from business operations and other activities shall be remitted to the investment and development fund and 20% to the financial reserve fund.

B. FINANCIAL PLAN

Each year, basing themselves on the stipulations and guidance of the financial agencies, the groups of airports shall have to make reports on:

- The production and business plan including public utility activities and other business activities according to the prescribed regime of the State.

- Making the financial income and expenditures estimates (including the plan of allowances and price subsidies (if any).

These reports shall be sent to the Vietnam Civil Aviation Administration, the Ministry of Finance and the tax agency. After reaching a written agreement with the Ministry of Finance, the Vietnam Civil Aviation Administration shall ratify and assign the yearly plan to the groups of airports and shall at the same time guide the units carry out the draft financial income and expenditures plan and ensure the plan of financial collection and remittance to the State budget.

C. INSPECTION OF FINANCIAL REPORT AND PUBLIC ACCOUNTING OF FINANCE

1. Making the financial report.

Every quarter and annually, the groups of airports have to make the financial reports as currently prescribed. The General Director of the group of airports is answerable to the State and law for the accurancy, truthfulness of the financial reports.

- The quarterly and annual financial reports shall be sent to the Vietnam Civil Aviation Administration, the local tax agency, the agency managing State capital and properties at the enterprise, the statistical agency according to the contents and form prescribed in Decision No. 1141/TC/QD-CDKT of November 1st, 1995 of the Minister of Finance on the accountancy regime at State enterprises.

2. Inspecting the financial report.

Quarterly and annually, the groups of airports must inspect the accountancy and financial report of their units.

- The Vietnam Civil Aviation Administration together with the agency managing capital and properties of the Sate at the enterprise, shall have to organize the inspection and ratification of the annual financial reports of the groups of airports of the regions.

- The financial agency shall have to inspect the observance of the financial and accountancy regimes and the discipline in the collection and remittances to the Budget as well as the accurancy and truthfulness of the financial reports.

- Violations of the accountancy regime, the financial collection and expenditure regime, the regime of collection and remittance to the Budget, the regime of setting up and use of the funds of the enterprise shall be administratively or economically sanctioned as prescribed by law.

3. Public announcement of annual financial report.

- Basing itself on the annual financial report ratified by the competent authority the group of airports shall publicly announce a number of financial norms at the conference of the personnel of the enterprise.

- The contents of the norms to be publicly announced shall comply with Circular No. 06-TC/TCDN of February 24, 1997 of the Ministry of Finance.

III. IMPLEMENTATION PROVISIONS

1. Apart from the stipulations in this Circular, the groups of airports of the various regions shall also have to implement other stipulations of law regarding State enterprises.

2. This Circular takes effect as from January 1st, 1999. All earlier stipulations on financial management at the groups of airports which are contrary to this Circular are now annulled.

3. In the process of implementation, should any problem arise, the enterprises would report in time to the Ministry of Finance for study and appropriate amendment and supplement.

For the Minister of Finance

Vice Minister

TRAN VAN TA